central problems of an economics (economics problem)

economics

1. By : Dhirendra Chauhan Central Problems of an Economy

2. “Economic problem ( Central problems ) are the problems of resource allocation or making choices in the use of scarce resources having alternative used” Economic Problem OR “ it is the problem of making choices in the use of scarce resources for satisfaction of unlimited wants ”

3. “Scarcity ” ( The root of central problems ) The problem of choices which given rise to various central problems of our economy is also defined as the problem of economising resources. Scarcity is the mother of all economic problems.

4. “ Why does an economic problem arise ” Unlimited human wants: No man can satisfy his wants fully Limited resources : resources are scarce in relation to the need for them Resources can be put to alternative uses : Resources are not only limited but can also be put to different alternative uses

5. “Allocation of Resources” It is the basic problem related to utilisation of resources for the production of different goods and services . Types :- Allocation of resources has three aspects What to produce and in what quantity How to produce For whom to produce

6. What to produce and in what quantity

7. How to produce

8. For whom to produce

9. Diagram X Commodity A B M N X Y x 1 x 2 y 1 y 2 Y Commodity x y O K Slope of Δ KMN = Perpendicular Base KM KN = = Y 1 Y 2 X 1 X 2 (-) Δ Y Δ X MRT =

10. Properties of PPC on MOC PPC slopes downwards PPC slopes downwards from left to right because from the given resources , production of both the goods cannot be increased. More of good X can be produced only by producing less of good Y. it is because renounces are fixed PPC is concave to the point of origin A concave downward sloping curve has an increasing slope. i.e.- increasing marginal opportunity coast or increasing MRT

11. Types of MOC 1. Increasing MOC X Commodity A B X Y Y Commodity O Combinations A B C D E X Commodity 1 2 3 4 Y Commodity 100 90 70 40 MOC = Δ Y/ Δ X - 10÷1 = 10 20÷1 = 20 30÷1 = 30 40÷1 = 40 Concave PPC

12. Types of MOC 2. Deceasing MOC X Commodity A B X Y Y Commodity O Combinations A B C D E X Commodity 1 2 3 4 Y Commodity 100 60 30 10 MOC = Δ Y/ Δ X - 40÷1 = 40 30÷1 = 30 20÷1 = 20 10÷1 = 10 Convex PPC

13. Types of MOC 3. “Constant MOC” X Commodity A B X Y Y Commodity O Combinations A B C D E F X Commodity 1 2 3 4 5 Y Commodity 100 80 60 40 02 MOC = Δ Y/ Δ X - 20÷1 = 20 20÷1 = 20 20÷1 = 20 20÷1 = 20 20÷1 = 20 Straight Line PPC

14. Explanation PPC MOC Concave Convex Straight Line

15. Thank You